Thursday, December 13, 2007
I’ve been watching the increasing pressure hedge funds have come under since August (following the sub-prime meltdown). Pressure like:
- MAN Group’s Peter Clarke said he expected 1 in 10 hedge funds to fail, up from the 5-7% historical attrition rate;
- it is becoming clearer that many hedge funds are inflating their reported size by including borrowed amounts, where a “$2 billion” fund turns out to have had less than $100 million;
- institutions like universities are starting to feel/fear their exposure to hedge funds;
- and European politicians increasing their agitation for regulation of hedge funds.
But in contrast, at the same time the “ultra-wealthy” continue to increase their investment in hedge funds – and where the smart money goes, so the rest of us will continue to follow.
(As a fascinating aside the same report says the over-$50M crowd are also, for the first time, getting more of their news online than from newspapers)
So while it’s been a tough environment, most of our hedge fund customers are managing well--employing discipline and the short strategies that they pioneered. What’s more, there are continued signs of innovation and growth across the community, with big moves out of Japan to the rest of Asia and new products for Russia.